In Re: Alleged bid-rigging in E-Tenders invited by the Department of Agriculture, Government of Uttar Pradesh for soil sample testing (Competition Commission of India)
The Commission notes that cartelisation, including bid rigging, is a pernicious form of anti-competitive conduct under the provisions of Section 3 of the Act. None of the Opposite Parties or their individuals have been able to rebut the evidence found against them by the DG of having indulged in anti-competitive conduct and manipulating the bids/bid rigging in respect of tenders floated by the Department of Agriculture, State of Uttar Pradesh. The Commission finds that certain Opposite Parties and their individuals had also resorted to the production and submission of fake invoices and grant of false certificates for making some of the Opposite Parties eligible for participating in the bid process so as to effectively act as cover bidders in respect of the winning bidders. Some of the Opposite Parties did not even have prior experience and were later blacklisted.
In view of the foregoing, the Commission holds Yash Solutions, M/s Satish Kumar Agarwal, M/s Siddhi Vinayak, M/s Saraswati Sales Corporation, M/s Austere System Pvt. Ltd., Delicacy Continental Pvt. Ltd, Fimo Infosolutions Private Limited, M/s Toyfort and Chaitanya Business Outsourcing Pvt. Ltd. to have contravened the provisions of Section 3(1) of the Act read with Section 3(3)(c) and 3(3)(d) thereof, as detailed in this order.
Further, the Commission, in terms of Section 27 (a) of the Act, directs the Opposite Parties and their respective proprietors and directors who have been held liable in terms of the provisions of Section 48 of the Act to cease and desist from indulging in practices which have been found in the present order to be in contravention of the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act, as detailed in the earlier part of the present order.
The Commission, for the reasons recorded below, finds the present case fit for imposition of penalty. Under the provisions contained in Section 27(b) of the Act, the Commission may impose such penalty upon the contravening parties as it may deem fit, which shall be not more than ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreement. Further, in cases of cartelisation, the Commission may impose upon each such cartel participant a penalty of up to three times its profit for each year of continuance of the anti-competitive agreement or 10 per cent of its turnover for each year of continuance of such agreement, whichever is higher.
It may be noted that the twin objectives behind the imposition of penalty are: (a) to reflect the seriousness of the infringement; and (b) to ensure that the threat of penalties will deter the infringing undertakings from indulging in similar conduct in the future. Therefore, the quantum of penalty imposed must correspond to the gravity of the offence, and the same must be determined after having due regard to the mitigating and aggravating circumstances of the case.
On the issue of penalty, most of the Opposite Parties in their objections to the Investigation Report and subsequent submissions have averred, referring the decision of the Hon’ble Apex Court in the case of Excel Corp Limited vs. Competition Commission of India and others (2017) 8 SCC 47, that the turnover to be calculated under Section 27 of the Act has to be the relevant turnover, which relates to the product in question, in respect whereof, the provisions of the Act are found to be contravened. The Opposite Parties have averred that, as that they could not derive any income from the soil testing tenders for never being involved in the business of soil testing, zero penalty would naturally arise out of nil income and nil turnover. Some of the Opposite Parties have prayed for mitigation of penalty on the grounds of being Micro Small and Medium Enterprises (MSME).
With regard to the submission of the Opposite Parties that they have derived no income from tenders in question and hence zero penalty would arise, the Commission finds no merit in the said submission and no narrow interpretation of the relevant turnover can be taken as suggested. The Commission, in this regard, reiterates its decision dated 03.02.2022 in Suo Motu Case No. 2 of 2020 (In Re: Alleged anti-competitive conduct by various bidders in supplying and installation of signages at specified locations of State Bank of India across India):
“115. In relation to the contention that turnover derived from the Impugned Tender alone should be considered, it is noted that a bare perusal of the Excel Crop Care judgement makes it clear that nowhere it held or otherwise declared that relevant turnover should be limited to the turnover earned from the specific customer or tender. Such a plea would frustrate the underlying policy objective of deterring the cartelists besides providing them a fertile ground for regulatory arbitrage. For example, if owing to the understanding between the bidders, if some or few bidders have refrained from participating in the particular tender under investigation, the turnover of the said parties from the said tender would obviously be nil, resulting in nil penalty. To allow such parties to walk free without incurring any monetary penalty for their anti-competitive conduct simply because they did not have any turnover from the concerned tender, would not only stultify the Parliamentary intent in providing deterrence through penalties against such behaviour but would also run contrary to the underlying spirit of the judgment of the Hon’ble Supreme Court of India in Excel Crop Care judgment. Taking such a pedantic interpretation would provide a virtual free run to the infringing parties and an effective immunity against any antitrust action for their anti-competitive behaviour. This cannot be the purport or intent either of the Parliament or the Hon’ble Supreme Court of India in laying down the parameters and perimeter for imposition of monetary penalty upon the contravening parties. Therefore, such contentions by the OPs need to be rejected.”
The Commission notes that the instant case emanates out of conduct pertaining to public procurement in soil testing tenders and, as such, is a fit case to impose penalties upon the infringing parties. On a holistic appreciation of the facts and circumstances of the case and the mitigating factors put forth by the Opposite Parties, the Commission observes that the findings of the DG clearly indicate the active role played by each of the Opposite Parties in rigging the tenders. The Commission accordingly imposes the penalty upon the Opposite Parties @ 5 percent of the average of their turnover for the three financial years, i.e., 2017-18, 2018-19 and 2019-20.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
Order under Section 27 of the Competition Act, 2002
A. Background
1. The present case arises out of a general complaint dated 07.08.2018 received by the Commission alleging bid-rigging in tenders invited by the Department of Agriculture, Government of Uttar Pradesh for soil sample testing. Soil sample testing is the analysis of a soil sample to determine its nutrient content, composition and other characteristics such as acidity and pH level.
2. The complaint pertained to alleged bid-rigging in respect of two e-tenders, namely, Tender 2018_AGRUP_210583_1 (Moradabad) dated 31.05.2018 (“Tender No. 1”) and Tender 2018_AGRUP_212591_1 (Bareilly) dated 18.06.2018 (“Tender No. 2”), invited for soil sample testing by the Department of Agriculture, Government of Uttar Pradesh. The details of the said tenders as provided in the complaint are as under:
Tender No. 1
